ASX closes lower but Trump calms markets with 10-day deadline as oil slides

Conflict-driven volatility continues to ripple through Australia’s sharemarket as traders juggle tensions in the Middle East, uncertain if they will ease or escalate after US President Donald Trump said he would extend by 10 days a deadline for Tehran to open the Strait of Hormuz.

The S&P/ASX 200 slid after it opened on Friday before making up ground to close just shy of where it started, down just 0.11 per cent at 8516.3. Overall, it ended the week higher than it started, marking its first positive week since US-led attacks on Iran sparked an energy price shock that has roiled global markets.

Oil prices pulled back more than 1 per cent from a high near $US108 after Trump’s announcement on Truth Social of a 10-day reprieve injected some optimism. But oil had edged up again to about $US107 a barrel as the Australian market closed.

The president’s change in tone came after torrid day of trade on US markets, where the S&P 500 plunged 1.7 per cent, its worst day since the conflict began.

The latest bout of whipsaw trading extends a month of war-driven swings, with investors uncertain about where hostilities will go. Traders are closely watching the Strait of Hormuz, a key waterway for Middle East oil flows that remains effectively shut, driving crude oil higher and adding to inflation pressures.

“By extending the deadline, it effectively kicks the can down the road, pushing back any concrete resolution regarding the reopening of the Strait of Hormuz,” Tony Sycamore, a market analyst at IG Australia, wrote in a note. “This, in turn, simply extends the uncertainty weighing on markets and the broader global economy.”

On the local bourse, energy stocks were mixed. Woodside Energy closed down marginally, Santos added 1.27 per cent, Ampol gained 1.99 per cent and Yancoal jumped 3.59 per cent. The key LNG sector faces further disruption as powerful Tropical Cyclone Narelle hits output at Chevron’s Wheatstone gas platform and its huge Gorgon gas plant on nearby Barrow Island.

Iron ore giants made gains over the day. BHP rose 0.28 per cent while fellow heavyweights Rio Tinto and Fortescue edged up 1.46 and 1.71 per cent respectively. Gold miners dropped, with the price of the safe haven metal hovering around $US4400 per ounce. Northern Star lost 1.12 per cent and Evolution Mining shed 1.42 per cent.

Financial stocks stayed relatively flat. The bigger movers were National Australia Bank, down 1.34 per cent, and Macquarie, off 2.15 per cent. The tech sector was most challenged by NEXTDC, which lost 7.89 per cent. WiseTech was flat and Xero added 0.61 per cent.

The Australian dollar was weaker at US68.95¢ at 10.39am AEDT.

On Wall Street, the S&P 500 slumped 1.7 per cent for its worst day since January and is back on track for a fifth straight losing week. That stretches back to before the Iran war began, and it would be the longest such losing streak in nearly four years, although futures point to a lift in the next session.

Trump said talks with Iran were going “very well”. He also said he would extend his pledge to refrain from attacks on the country’s energy sites, offering a brief calm to global energy markets jolted by the conflict.

Iran responded to the ceasefire proposal through intermediaries, the semi-official Tasnim news agency reported, and is awaiting a reply. Tehran has a string of conditions for ending the conflict, one of which is a guarantee that the US and Israel won’t resume attacks.

“We’re now thinking forward, and not about a resolution,” said Carl Larry, oil and gas analyst at Enverus. “We’re heading into another weekend with risk still to the upside, and waiting for something worse rather than something better.”

On Thursday (US time), the fighting continued, and thousands more US troops neared the region. Iran, meanwhile, tightened its grip on the crucial Strait of Hormuz. It may be creating something like a “toll booth” for tankers to get past the narrow waterway, through which tankers carrying a fifth of the world’s oil typically pass to reach customers worldwide.

High Treasury yields and disruption in the bond market were big factors that Trump named a year ago when he backed off his initial threats for global tariffs made on “Liberation Day”. The moves caused critics to allege Trump always chickens out, or “TACO”, if financial markets show enough pain.

The yield on the 10-year Treasury jumped as high as 4.43 per cent on Thursday from 4.33 per cent late Wednesday and from just 3.97 per cent before the war started. That’s a significant leap for the bond market, and has already sent rates higher for mortgages and other kinds of loans for US households and businesses, which slows the economy.

With AP, Bloomberg

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.